Once again, Eric Schmidt (call sign “Uncle Sugar”) shows us why he will never understand the music business.

Many, many years ago, I attended a panel that included a finance executive from a major label. He was describing how the record company allocated resources to the records they were working.

As he explained it, 90% of the resources went to the top 10 sellers. This seemed absolutely idiotic to me. I raised my hand and asked, “If you are allocating resources to the records that are already successful, how do you support the records that are yet to be successful?”

Pause.

“We think this is the best way to maximize profits.”

“But how does a record get to be in the top 10 sellers if you are starving it from promotion and marketing spend?”

Pause.

“They have to prove they have an audience.”

“How?”

Pause.

“We think this is the best way to maximize profits.” Read [shut up kid, you’re bothering me]

“Luck then?”

“What do you mean?”

“I mean that you get to have a hit by being lucky.”

So fast forward to 2014 and we have:

“If you’re choosing where to invest resources, feed the products that have earned support, not the ones that need it.”

Like this:

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One of the first things every label learns the hard way is that word of mouth and not money is what sells records. No label is likely to invest too little to get a new release’s word of mouth started but from that point on it needs to earn further support or the label very quickly goes broke. It really has been a meritocracy and not a bunch of suits playing “god.” Now what I don’t buy is the “luck” argument and would never sign with an incompetent sorcerer’s apprentice like that.